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IVAs Drive Personal Insolvencies to Seven-Year High18th February 2019
The construction industry was the worst affected by company insolvencies in 2018, with almost 3,000 companies unable to pay their bills.
This is a 12% increase on the previous year.
A total of 2,954 construction firms were unable to pay debts last year and entered Liquidation, Administration or another insolvency process like a Company Voluntary Arrangement (CVA).
Excluding one-off ‘bulk insolvency events,’ which are linked to a series of connected companies filing for Voluntary Liquidation at the same time, corporate insolvencies increased 10% to 16,090 year on year.
And the insolvency rate appears to be accelerating. Compared with the third quarter of 2018, insolvencies rose by 9.3% in the final three months of last year.
Corporate insolvency trade body R3 said that weak consumer demand and uncertainties around Brexit contributed to the uplift in company insolvencies.
R3 president Stuart Frith said: “The pressure point for businesses most frequently cited by our members is weak consumer demand. People just don’t have much spare cash at the moment.”
He continued: “Meanwhile, uncertainty around the shape of the final Brexit deal and future EU-UK trading relationship is already forcing businesses to hold off on investment decisions, again affecting their suppliers and customer networks. It has also prompted some companies to stockpile, putting a squeeze on cash flow and reserves.”
Frith also warned that businesses in the health and education sectors could be hit by cuts to public sector provision in 2019.
The total number of Liquidations fell slightly 0.5% to 15,618, but the number of Compulsory Liquidations increased by 11% to 3,117. This indicates that the number of insolvent firms being forced out of business is on the rise.
Year on year, the total number of Administrations increased by 11.2% in 2018 and the number of CVAs increased by 16%, but this was mostly driven by the retail sector.
Umbrella Insolvency Licensed Insolvency Practitioner Tom Fox said: “Rising corporate insolvencies is a concern for businesses, but as the wait for clarity on a final Brexit deal goes on, some sectors are more exposed than others.
“Consumer facing businesses like shops and restaurants have been hit by falling consumer demand which is reflected by an uptick in personal insolvencies.
“In the commercial construction sector, demand has also taken a hit as enterprises either put off or reconsider investment decisions. With the pound taking a hit, the cost of materials and labour has also increased and the lack of clarity on a future UK-EU trading relationship could mean that these costs increase again in 2019.”
For more information on corporate insolvency solutions, speak to a member of the Umbrella Insolvency team today. Call: 0800 611 8888.